interest free loan???

steve_gb

As Baldrick would say I have a cunning plan,

Apart from my Mortgage I am debt free and need to raise £12,000 for an investment which i want to pay off over 4 years with low or no interest i do not have enough Limit on my credit card to help.

My Mortgage is one of those current account decreasing overdraft types and i am currently paying 5.9% Interest on £80,000
Here is My plan
If i extend my mortgage by £12,000 then transfer the whole mortgage to a similar account with lower interest (around 5.5%) i can then pay £250.00 a month into a regular saver at 10%.
After 4 years i can then pay that back on to the mortgage with high interest earned. As long as the interest on the regular saver is always more than the mortgage interest it should work.....shouldnt it?????

seanparkin

While this would be cheaper than taking out a loan, it wouldnt work exactly as you think as you'll be charged interest on the whole £12k over the entire 4 years, whereas the interest earnt in the saver account is detrimental

Plus the 10% on the saver account probably won't be available for any longer than 12 months?

steve_gb

Sean,
I understand your reasoning but what do you mean by "detremental"?
The halifax have held their regular saver at 7% for 2 years now...and i am willing to move it every 12 months.

The best i have found in paying back interest is £1,730 interest over 4 years all i want to do is decrease this as much as possible....any advice would be grateful.

mrmajika

I believe these high interest regular saver accounts at 10% can only run for 12 months, although I could be wrong.

jonnyb

Having just read a few more posts about moneyback bank, they sound like a bad option,so I'm adding this edit to my inital post below. But the comparison will find other companies with similarly low rates.


Have you checked moneysupermarket.com to compare loans ?
Moneybackbank have a loan offer at 5.5% (depending on credit score obviously) which says £12000 over 4 years would cost you £1360.80 in interest.
I'd be careful to account for every penny in your calcs though.
Will there be a redemption penalty for moving your mortgage ?
Will a new mortgage charge a fee to apply - most seem to these days.
Even if the regular savers continue, the interest is not that good. A 7% saver is gross; you will pay at least 20% tax on the interest. Saving £250 per month would total £3000. Assuming that the whole £3000 gets 7% (which does not happen anyway, as it's £250 for month1, £500 for month 2) the net interest would be £168 per year.

If possible, I would suggest borrowing the £12k at the cheapest rate possible, then using a credit card if possible to "stooze" £3000 per year into a cash isa. You did not say what sort of limit(s) you have available.
The interest on the ISA could be at least £600 over 4 years; if you have a wife / partner who could do the same then you almost cancel out the interest on the loan. Plus you save any costs related to moving your mortgage.